Monday, February 9, 2009

President Andrew Jackson on the Current Economic "Crisis"

President Andrew Jackson vetoed the Congressional bill renewing the charter of the Second Bank of the United States and then moved the federal government's assets out of the bank, fearing that the BUS would have otherwise bribed Congress to override his veto. The following considerations in President Jackson's 1837 farewell address are peculiarly relevant to the incompetent policies of today's Federal Reserve Bank and its responsibility for the current banking problems:

"The paper system being founded on public confidence and having of itself no intrinsic value, it is liable to great and sudden fluctuations, thereby rendering property insecure and the wages of labor unsteady and uncertain...In times of prosperity, when confidence is high...[the banks] extend their issues of paper beyond the bounds of discretion and the reasonable demands of business; and when...public confidence is at length shaken, then a reaction takes place, and they immediately withdraw the credits they have given, suddenly curtail their issues, and produce an unexpected and ruinous contraction of the circulating medium, which is felt by the whole community. The banks by this means save themselves, and the mischievous consequences of their imprudence or cupidity are visited upon the public. Nor does the evil stop here. These ebbs and flows in the currency and these indiscreet extensions of credit naturally engender a spirit of speculation injurious to the habits and character of the people...It is not by encouraging this spirit that we shall best preserve public virtue and promote the true interests of our country; but if your currency continues as exclusively paper as it now is, it will foster this eager desire to amass wealth without labor; it will multiply the number of dependents on bank accommodations and bank favors; the temptation to obtain money at any sacrifice will become stronger and stronger, and inevitably lead to corruption, which will find its way into your public councils and destroy at no distant day the purity of your Government. Some of the evils which arise from this system of paper press with peculiar hardship upon the class of society least able to bear it...It is the duty of every government so to regulate its currency as to protect this numerous class, as far as practicable, from the impositions of avarice and fraud...Yet it is evident that their interests can not be effectually protected unless silver and gold are restored to circulation...

"The distress and sufferings inflicted on the people by the bank are some of the fruits of that system of policy which is continually striving to enlarge the authority of the Federal Government beyond the limits fixed by the Constitution. The powers enumerated in that instrument do not confer on Congress the right to establish such a corporation as the Bank of the United States, and the evil consequences which followed may warn us of the danger of departing from the true rule of construction...Let us abide by the Constitution as it is written, or amend it in the constitutional mode if it is found to be defective."

Google Custom Search

Pages

Mitchell Langbert

About Me

I have researched and written about employee benefit issues and in my previous life was a corporate benefits administrator. I am currently associate professor of business at Brooklyn College. I hold a Ph.D. from the Columbia University Graduate School of Business, an MBA from UCLA and an AB from Sarah Lawrence College. I am working on a project involving public policy. I blog on academic and political topics.